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PAPER WORKING Hay Job Evaluation Foundations and Applications The Hay Method of Job Evaluation continues to be the most widely accepted worldwide, in use by over half of the world’s 50 largest companies as well as in government, public, and not-for-profit institutions. The process of evaluating jobs enables many important applications, such as designing effective organizations; clarifying interdependencies and accountabilities; managing succession and talent; and setting competitive, value-based pay policies.

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P A P E RW O R K I N G

H a y J o b E v a l u a t i o n

F o u n d a t i o n s a n d A p p l i c a t i o n s

The Hay Method of Job Evaluation continues to be the most widely accepted

worldwide, in use by over half of the world’s 50 largest companies as well as in

government, public, and not-for-profit institutions.

The process of evaluating jobs enables many important applications, such as

designing effective organizations; clarifying interdependencies and accountabilities;

managing succession and talent; and setting competitive, value-based pay policies.

Copyright © 2005 Hay Group, Inc. All rights reserved.

H a y J o b E v a l u a t i o n

F o u n d a t i o n s a n d A p p l i c a t i o n s

Introduct ion 1

Hay Job Evaluat ion: Foundat ions 2

So, Who Is Accountable? [s idebar]

Hay Job Evaluat ion Factors 3

Accountabi l i ty

Know-How

Problem Solv ing

Legal Aspects of Hay Job Evaluat ion [s idebar] 5

Hay Guide Charts ®

Job Size and Shape 7

Appl icat ions of Hay Job Evaluat ion 8

Organizat ional Design and Analysis

Step Di f ferences

Job Design and Analysis 10

Job/Person Matching 11

Succession Planning and Development 12

Pay Structures and Grading 13

The Job Evaluat ion Process 14

Conclusion 15

About Hay Group

P A P E RW O R K I N G

11

To ensure a reasonable balance

between f lex ib i l i ty and contro l ,

many organizat ions are

revamping the process through

which they value work.

I n t r o d u c t i o n

I n the 1990s, the Internet and its parallel business boom fueled a war for

talent, creating a belief that organizations either move at “e-speed” or risk

being passed by start-ups with radically different business models. As a result, many

organizations sacrificed disciplined processes that for years helped them control

costs—especially pay-related costs. The even more challenging post-tech boom

business environment, however, made those same organizations realize that any lost

discipline meant higher costs, inconsistency, and a potential loss of defensible

objectivity related to pay programs.

To ensure a reasonable balance between flexibility and control, Hay Group is working

with many organizations to revamp the processes through which those organizations

value work. One key driver is the need to reestablish discipline within compensation

programs, and to better align pay with value creation—particularly at executive levels.

Beyond that, our job evaluation processes help well beyond defining appropriate

pay levels. Evaluating jobs not only provides consistent work value measurement,

it also gives organizations a common framework and language to design jobs,

define career progressions, analyze organization structures, and more strategically

manage human resources.

This paper provides an overview of the Hay Guide Chart®-Profile Method of Job

Evaluation and introduces a number of valuable applications. One key finding of

our research with WorldatWork and Loyola University of Chicago (of more than

1,200 organizations) indicates that between 82% and 96% of organizations evaluate

jobs, but only 18% proactively maintain their systems. Moreover, a majority reports

that they believe approximately 20% of jobs are incorrectly placed within the job

grading structure. As a result, we believe there is significant untapped potential to

leverage job evaluation efforts to optimize organizational structures, develop people

as key performers, and build employee commitment through reward programs that

are fair, motivational, and competitive.

H a y J o b

E v a l u a t i o n :

F o u n d a t i o n s

H ay Group pioneered the “factor

comparison” job evaluation

method and modified it in its Guide

Charts in the early 1950s. The Hay Guide

Charts® are proprietary instruments that

yield consistent and legally defensible

work evaluations. Hay Group’s job

evaluation approach, in fact, is the world’s

most widely accepted—used by an

estimated 8,000 organizations, including

half of the Fortune 50 companies.

Organizations use the Hay methodology

to evaluate jobs against a set of common

factors that measure inputs (required

knowledge, skills, and capabilities),

throughputs (processing of inputs to

achieve results), and outputs (end result

expectations from applying inputs

constructively). During the evaluation

process, each job’s content is analyzed

relative to each factor and represented

by a numerical value. These factor values

are then totaled to determine the overall

job “size.” The various job size relation-

ships, as well as the factor proportions

associated with each job, can be useful

in a number of organizational and

human resource planning applications.P A P E R

W O R K I N G 22

The Hay Guide Charts ® are our

propr ietary instruments that

y ie ld ef f ic ient , consistent , and

legal ly defensib le evaluat ions.

So, Who Is Accountable?

A clear understanding of impact and its

relation to overall accountability is critical

when designing and evaluating jobs.

Consider the case of a major hotel chain

CEO who ruled that the annual planning

around “rack rates” for each property would

be shared between the managers of national

sales and operations. He reasoned that if he

left it only to national sales, then the hotel

managers would blame them if they did not

achieve their goals. Likewise, if he delegated

it just to the hotel managers, then national

sales could blame the hotel managers if they

failed to attract accounts to their properties.

Just when it looked like he had agreement,

the Finance Director complained that she

had the most critical information on past

trends plus impact on profitability under

different scenarios. She believed she should

share in—or maybe even drive—the decision.

The CEO, however, wisely decided that three

people responsible for making decisions

would slow the process. In addition, having

the Finance Director make the decision

would give the national sales reps and hotel

managers an excuse to hide behind in not

making their numbers.

Clearly, the Finance Director had to contribute

to the decision. The national sales people and

hotel managers could not make decisions

without relevant financial information. By

properly defining concurrent accountability,

the CEO actually sped up decision-making

and increased accountability for results.

The “Impact” element when evaluating

accountability can be segmented along

four lines:

� Ancillary. Informational, recording, or

incidental services for use by others in

relation to some important end result. Job

activity may be complex, but impact on

the overall organization is relatively minor.

These jobs are usually involved with

collection, processing, and explanation of

information or data, typically required by

others to make decisions impacting

organizational results.

(continued)

P A P E RW O R K I N G

33W O R K I N G

Every job exists to add value

to the organizat ion through

del iver ing some set of resul ts .

H a y J o b E v a l u a t i o n :

F a c t o r s

The input-throughput-output model

is reflected in the Hay Method as Know-

How,Problem Solving,and Accountability.

Each grouping can be further broken

down into eight elements for the work

value assessment.

The output factor—Accountability—

is covered first, since every job is

designed to achieve predetermined

results. This factor typically receives the

least attention and weight in many

other evaluation methodologies.

Accountability

Every job exists to add organizational

value by delivering some set of results

(or outputs). Accountability measures

the type and level of value a job can add.

In this sense, it is the job’s measured

effect on an organization’s value chain.

It has three dimensions:

1. Freedom to Act: The degree of

empowerment to take action and

the guidance provided to focus

decision-making.

2. Scope: The business

measure(s) the job is designed

to positively impact.

3. Impact: The nature of the job’s

influence on business results.

� Contributory. Interpretive, advisory, or

facilitating services for use by others in

taking action. This type of impact is

appropriate where jobs are accountable

for rendering significant “advice and

counsel” in addition to information and/or

analysis and when decisions are likely to

be made by virtue of that counsel. Such

impacts are commonly found in staff

or support functions that significantly

influence decisions relative to the

magnitude of various resources.

� Shared. Participating with peers, within

or outside the organization, in decision

making. This impact is used to describe

horizontal, not vertical (hierarchical),

working relationships. This type of impact

is not totally controlling relative to the

magnitude of the result. Shared impacts

typically exist between peer jobs and/or

functions, and suggest a degree of

“partnership” in, or “joint accountability”

for, the total result. For example, there

may be shared accountability between

engineering and manufacturing functions

for a successful product. Sharing is also

possible with “partners” outside the

organization (e.g., between project

manager and external contractor). When

this impact is selected, it is important to

clarify specific role contributions and to

identify initiators as well as tie-breakers

for decision making.

� Primary. Controlling impact on end

results, where any contributing inputs are

secondary. Such impacts are commonly

found in operations and managerial

positions that have “line accountability” for

key end-result areas, whether large or

small. For example, a supervisor may have

“primary accountability” for the production

or output (value added) of a unit within

the context of available resources (e.g.,

personnel resources and controllable

expenses); whereas the head of manu-

facturing may have a primary impact on

total value added in the manufacture of

products or on cost of goods manufac-

tured. The key here is that the job exists

to have the controlling impact upon

certain end results of a given magnitude,

and that accountability is not intended to

be shared with others. �

P A P E RW O R K I N G

44

Primary impacts are commonly

found in operat ions and

manager ia l posi t ions that have

“l ine accountabi l i ty” for key

end resul t areas, whether

large or smal l .

Know-How

To achieve the accountabilities of a job requires “Know-How”(or inputs),which is the

sum total of every capability or skill,however acquired,needed for fully competent job

performance. Know-How has three dimensions:

4. Technical/Specialized Skills: Depth and breadth of technical or specialized

knowledge needed to achieve desired results.

5. Managerial Skills: The requirement to undertake managerial functions,

such as planning and organizing staff or directing and controlling

resources, to achieve business results over time.

6. Human Relations Skills: The interpersonal skills required for successful

interaction with individuals and groups, inside and outside the organization.

Problem Solving

The value of Know-How is in its application to achieve results. “Problem Solving”

(or throughputs) refers to the use of Know-How to identify, delineate, and resolve

problems. We “think with what we know,”so Problem Solving is viewed as utilization

of Know-How,and has two dimensions:

7. Thinking Environment: The job’s context and the degree to which problems

and solutions are defined.

8. Thinking Challenge: The nature of addressable problems and the difficulty

in identifying solutions that add value.

Problem Solving measures the requirement to use Know-How conceptually,

analytically, and productively.

The above factors can be modified in specific client situations, but the pattern

around the three clusters relates to the inputs, throughputs, and outputs of the

defined position.

Although the definitions of these job criteria have evolved over the more than 60

years they have been used, the underlying principles of Know-How, Problem Solving,

and Accountability have been timeless as a general foundation for valuing work.

Our factors have also been widely accepted as a basis for setting fair and equitable

pay practices, and are compliant with the U.S. Equal Pay Act of 1963 and Canadian

P A P E RW O R K I N G

55W O R K I N G

Our methodology can be

cal ibrated to the va lue

systems of other organizat ions

with in the Hay databases.

provincial pay equity legislation. (For

more on this subject, see the sidebar on

the Legal Aspects of the Hay Method of

Job Evaluation.)

T h e H a y G u i d e C h a r t s ®

The Guide Charts are Hay Group’s

proprietary instruments that enable

consistent work evaluations. Each

of the above factors—Know-How,

Problem Solving, and Accountability—

has its own Guide Chart that reflects

the subelements identified above

(see Figure 1).

Each Guide Chart scale is expandable to

account for the complexity and size of

the organization to which it is applied,

and the scale descriptions can be

modified when appropriate. An impor-

tant distinction is that the Hay

Methodology can be calibrated to the

value systems of other organizations

within Hay’s compensation databases.

This enables a wide range of benchmark-

ing activities,potentially improving the

accuracy of market pricing and increas-

ing confidence in job evaluation results.

Legal Aspects of the Hay Guide Chart®-Profile Method of Job Evaluation

The Hay Method can be a useful tool in

meeting a global employer’s legal and

regulatory challenges. The Hay Guide Chart-

Profile Method of Job Evaluation is gender-

neutral and has not been found to be

discriminatory or unlawful in any reported

legal decision.

Our factors have also been widely accepted

as a basis for setting fair and equitable pay

practices, and are compliant with the U.S.

Equal Pay Act of 1963 and Canadian

provincial pay equity legislation, which

refers to job-to-job comparisons based on

“skill, effort, and responsibility.” Our method

has been court-tested time and again, and

has proven to be legally defensible since

its inception.

Working conditions such as physical

environment, hazards, manual effort, and

mental concentration can also be added to

account for job-context factors. However,

many of these factors—unlike the three Hay

factors identified above—can be potentially

discriminatory, so there needs to be a

compliant process to design and utilize

supplementary factors alongside the

Guide Charts.

The Hay Method is the job evaluation method

of choice of many public and private

employers, mainly because of the strong

belief that the Hay Method will serve them

best if legal challenges arise. For example,

the New Mexico State Supreme Court has

established a compensation plan for all

judicial branch employees in New Mexico,

and has mandated by Judicial Rule that all

such jobs must be evaluated in accordance

with the Hay Guide Chart-Profile Method of

Job Evaluation, so as to provide each

employee equitable compensation. �

P A P E RW O R K I N G

66

A 15% step-value progression by

job-evaluat ion factor represents

the “ just not iceable” d i f ference

between factors—especia l ly as

job content re lates to pay.

Figure 1: Illustrative Guide Charts

We generally see differences in job size in terms of ratio differences rather than

absolute unit differences,and the numbering pattern of the Guide Charts conforms with

this principle, using a 15% step-value progression by job-evaluation factor to represent

the “just noticeable”difference between jobs. Because of their importance in comparing

jobs, just noticeable step differences are discussed in greater detail on page 9.

Guide Charts expedite the job evaluation process, but considerable expertise is

required to understand the work’s nature to determine the degree to which elements

exist for each factor. The Guide Charts are a management tool, but as with all manage-

ment tools, using the tool effectively requires expertise. This is analogous to using

other management tools (e.g., internal rate of return or discounted cash-flow models)

for making investment decisions. The power is not only in the tool, but also in the

evaluator’s knowledge and skill and the consistency in the tool’s application across

the organization.

SPECIALIZED KNOW-HOW

D. Advanced VocationalSome specialized (generally non-theoretical) skills, acquired on or off the job, giving additional breadth or depth to a generally single function.

E. Basic SpecializedSufficiency in a technique that requires a grasp either of involved practices and precedents, and/or of theory and principles of science.

F. Seasoned SpecializedProficiency gained through wide exposure in a field that combines comprehension of involved practices and precedents, and/or theory and principles of science.

MANAGEMENT KNOW-HOW I. MinimalPerformance or supervision of one or more activities that are specific as to content and objectives, with general awareness of related activities.

II. RelatedOperational integration o activities th homogene activities.

HR1 HR2 HR3 HR1

115 132 152 152

132 152 175 175 2

152 175 200 200 2

152 175 200 200

175 200 230 230

200 230 264 264

200 230 264 264

230 264 304 304

264 304 350 350 4

1. BasicRouti

Segment of the KNOW-HOW Guide Chart

THINKING ENVIRONMENT

C. Semi-RoutineSomewhat diversified procedures and precedents.

D. StandardizedSubstantially diversified procedures and specialized standards.

E. Clearly DefinedClearly defined policies and principles.

THINKING CHALLENGE 2. PatternedSimilar situations that require discriminating choices between learned things that usually fall into well- defined patterns.

3. InterpolativeDiffering situations that require searches for solutions or new applications within areas of learned things.

19% 25% 33%

22% 29%

22% 29% 38%

25% 33%

25% 25% 33

29% 38%

Segment of the PROBLEM SOLVING Guide Chart

4. V th ti c t

FREEDOM TO ACT

C. StandardizedEstablished practices and procedures and/or general work instructions, and/or supervision of progress and results.

D. RegulatedPractices and procedures set precedents ro well-defined policies and/or supervisory review.

E. Clearly DirectedBroad practices and procedures set by functional precedents and policies, operational plans, and/or managerial direction.

MAGNITUDE% of a Large Organization's Results

Late 1990s US$

2. Small.01%-0.1%

$500M-$5MM

A. C. S. P. A.

A. AncillaryInformational, recording r other incidental ser

2. ImportantAlternative or combined skills in und

S. SharedParticip

Segment of the ACCOUNTABILITY Guide Chart

3. um.01

$5M

33 43 57 76 43 5

38 50 66 87 50 66

43 57 76 100 57 76

50 66 87 115 66 87

57 76 100 132 76 100

66 87 115 152 87 115

76 100 132 175 100 13

87 115 152 200 115 152

100 132 175 230 132 175

Indirect Impact Direct

and causing

®

© 2004 Hay Group, Inc.

P A P E RW O R K I N G

77

The balance among Accountabi l i ty ,

Know-How, and Problem Solv ing

ref lects the level and type of

work in an organizat ion.

J o b S i z e a n d S h a p e

The job’s size and shape serve as starting points for many job evaluation

applications. Job size is determined by the total of the factor point values for

Accountability, Know-How, and Problem Solving, and reflects the job’s relative

value to the organization. The relative proportions of Accountability, Know-How,

and Problem Solving that make up the job determine its shape (see Figure 2).

The balance between Accountability and Problem Solving reflects the extent to which

the job is primarily concerned with achieving results (often late in the value chain),or

is focused on research and analysis (often early in the value chain). For example, sales

positions are commonly associated with having a high degree of Accountability relative

to Problem Solving, and are accountable for selling products already developed.

Conversely, early-stage research positions are commonly associated with having a high

degree of Problem Solving relative to Accountability to develop new products, services,

and processes.

The balance among Accountability,Know-How,and Problem Solving reflects the level

and type of work in an organization. For example, entry-level positions typically focus

on Know-How. Accountability focus grows through career development into jobs that

impact the organization more broadly through application of acquired experience and

problem-solving capability. As jobs become more important,Know-How becomes

more leveraged and focus shifts to utilization of Know-How to solve problems and

achieve results.

KH

Figure 2: Proportions of Accountability, Know-How, and Problem Solving

Business Unit Manager: Large Operation

AC

PSKH

AC

PS

KH

AC

PS

Business Unit Manager: Smaller Operation

Receptionist: Lower-level Job,Different Shape

© 2005 Hay Group, Inc.

P A P E RW O R K I N G

88

A r igorous job-evaluat ion

process g ives organizat ions a

common f ramework and

language to more ef fect ive ly

design jobs wi th in the

st ructure that best supports

i ts business strategy.

In entry-level jobs, Know-How may account for 70% of job content, while at the

CEO level Know-How may only be 30% of job content (even though, of course, it is

significantly more important than Know-How for an entry-level position).

The job shape concept is unique to the Hay Method of Job Evaluation. In addition to

supporting job evaluation quality assurance, it enables further value-added applications

of the job evaluation system—for example,providing a better understanding of how

jobs fit into organizations,or better defining key work capability requirements.

A p p l i c a t i o n s o f H a y J o b E v a l u a t i o n

T he job evaluation process presents many other valuable insights, including a

clearer understanding of the interrelationships of accountabilities, capability

requirements, development needs, and, of course, setting competitive, value-based

pay practices.

O r g a n i z a t i o n a l D e s i g n a n d A n a l y s i s

Many people presume that organizational structures are the result of systematic,

methodical planning. However, in our experience, they evolve over time and are

often shaped by personalities, politics, and compromise into complex mosaics of

operating and support functions,business units, and internal alliances. The unintended

consequence may be overlaps and/or gaps in key accountabilities necessary to meet

core business objectives. In many organizations, jobs are designed with a functional

bias rather than from an overall organizational perspective. Thus, when looking

across an organization, accountabilities become unclear, important decisions flounder,

and business processes bog down. The result: confusion and potential turf wars.

A rigorous job analysis and job evaluation process provides organizations with a

common framework and language to more effectively design jobs within the structure

that best supports business strategy. Strategic goals and objectives can then be clarified

and distributed into job-specific accountabilities, to ensure that there are no gaps or

redundancies. It also enables organizations to identify and align key interrelationships

across critical business processes—especially when the benefits of doing so might

not be immediately obvious to the parties involved. Organization and job design

P A P E RW O R K I N G

99

Most jobs are designed

wi th a funct ional b ias

rather than f rom an overa l l

organizat ional perspect ive .

must be integrally managed, just as automobile engine components must be designed

to mesh under a variety of circumstances. Improperly integrated designs may cause

an engine to fail. The same is true for organizations.

Step Differences

Steps of “just noticeable”difference can be used to analyze organizational hierarchy.

In this context, we can consider the consequences of changes that have occurred as

organizations moved to leaner structures. Figure 3 compares the “traditional”manu-

facturing hierarchy with a leaner structure typically found in similar businesses today.

The steps of difference between the positions can be clearly measured through use

of the Hay Job Evaluation Methodology. In a traditional structure, the distance

between the work of a manager and subordinate is typically two steps, providing for

a meaningful promotion between the levels. The distance between manager and

subordinate in a lean structure may be four or more steps, making job content

progression between the levels difficult, even impossible, for a top performing

incumbent to achieve. Flatter structures often require career pathing opportunities

that are horizontal (across streams of work) rather than vertical (within the function).

Since the recent economic downturn, a large number of jobs have been eliminated

without a commensurate reduction in work, which means the content of many jobs

Figure 3: Step Differences Between Traditional and Delayered Structures

1 Manufacturing Director Manufacturing Director

2

3 Production Director

4

5 Plant Manager Plant Manager

6 Shift Manager

7

8 Superintendent

9 Cell Leader Supervisor

10

Job Content Steps Traditional Structure Delayered Structure

© 2005 Hay Group, Inc.

P A P E RW O R K I N G

1100

When jobs are designed or

changed, i t is a lso important

to determine whether or not

a job is doable .

may have increased. Plus, employees still with the company assume accountabilities

of remaining jobs, often without any rationalization or integration of existing

accountabilities. Adding too many and/or unrelated accountabilities often creates

distractions and confusion that limit job effectiveness.

J o b D e s i g n a n d A n a l y s i s

When jobs are designed or changed, it is also important to determine whether or

not a job is, in fact,“doable” (see Figure 4). We often see jobs change when they

are designed around the unique capabilities of a star performer with high potential

seeking increased challenges.

For example, to expect an individual

in a mid-sized organization to func-

tion as vice president of corporate

development—setting new strategy,

negotiating deals, and driving a growth

agenda—while also managing a

marketing department’s day-to-day

operations, can lead to serious

problems. Although there is an apparent

link between corporate development

and marketing, the shapes of these

jobs—and thus the competencies necessary to achieve outstanding performance—

are quite different, and the complexity of this role is substantial. Either the person will

burn out, or let one or both jobs suffer. If unchanged, these jobs may be just too

overwhelming or complex for the newly promoted incumbent.

It is important,of course, to examine the relationship between an organization’s job

requirements and the job position to ensure it is doable. The role demands in Problem

Solving and Accountability need to be commensurate with the Know-How brought to

the role. If the demands are too overwhelming, failure is likely. The new person may

lack the credibility or experience required, and will likely become overwhelmed,

frustrated, or focused only on a subset of the job accountabilities the incumbent

can master.

© 2005 Hay Group, Inc.

Figure 4: Doable Roles

� Poor Performance

� Bad Decisions

� Stress

� Depression

� Diminished Initiative

� Terminations

Know-How

� Boredom

� Demotivation

� Internal Competition

� Cynicism

� Dead Initiative

� Departures

Ac

co

un

tab

ilit

y a

nd

P

rob

lem

So

lvin

g

Optim

umJob

Doabili

ty

H

LL H

Figure 4: Doable Roles

P A P E RW O R K I N G

1111

Hay Group’s research reveals

a st rong l ink between the

nature and shape of execut ive

jobs and the competencies

required to achieve

outstanding performance.

Conversely, if the demands are minor relative to the incumbent’s capabilities, there is

a good chance that the incumbent will grow bored, demotivated, and/or push for

accountabilities in others’domains and not add value commensurate to their pay level.

J o b / P e r s o n M a t c h i n g

Hay Group’s consulting experience and research reveals a strong link between

the nature and shape of executive jobs and the competencies required to achieve

outstanding performance. Understanding the work’s scope significantly increases

our ability to select and develop high-performing executives. Conversely, it also

enables us to design jobs that increase the likelihood that the jobholder will succeed.

Consider the role of country manager in a multinational corporation. Traditionally,

country managers were judged by profit-and-loss (P&L) responsibility, and enjoyed

high degrees of autonomy and accountability. However, many highly complex

businesses have transformed that role into one focused on adapting products for

local markets and managing the political and regulatory landscape—with P&L now

in the global president’s hands. The country manager’s role has, therefore, changed.

When such transformations occur, it is important to revisit job requirements to

determine whether the incumbent remains a good fit. Focus then can turn to

aligning the job requirements with jobholder motives. Although designing jobs

around individuals is generally an ineffective practice, you must consider the

motivational profile of a typical person who would fill the job over time.

For example, the two sales and marketing organization positions in Figure 5 have

similar job sizes, but very different shapes. And the personal characteristics

associated with success in these roles are also very different. Not surprisingly,

most people who excel in sales positions do not necessarily excel as managers

Figure 5: Job Shape Sampling

© 2005 Hay Group, Inc.

Sales & Marketing Director

Head of Market Research &

Analysis

Area Sales Manager

Production Director

Plant Manager 500 emps

Plant Manager 1500 emps

Plant Manager 4000 emps

P A P E RW O R K I N G

1122

There are a f in i te number of job

shapes which makes i t possib le

to use th is concept to map ro le

types across an organizat ion.

and vice versa—although both jobs add significant organizational value. On the

other hand, our research and consulting experience reveals that the successful

small plant manager has a high probability of also being successful at a similar, but

larger plant. There are a finite number of job shapes that make it possible to use

this concept to map role types across an organization.

S u c c e s s i o n P l a n n i n g a n d D e v e l o p m e n t

Job size and shape also illuminate the nature of development. For example, it is

probably easier to move the manager from a smaller plant to a larger plant than to

move that same manager into a sales position. In the former scenario, the person

understands the high-performance behaviors. The role is simply larger, not necessarily

different. But the lateral move from a collaborative role to an action-oriented, target-

focused role will mean deploying very different behaviors and skills.

Earlier, we explained the concept of step difference as an aid to judgments on job-

size relativities. When combined with organization structure analysis and job design,

analysis of step differences between jobs within a hierarchy can also be used to

assess the extent to which a job prepares one for the additional challenges of a more

important job (see Figure 6).

A one-step difference between boss and subordinate roles means that there is a job

that provides a good feeder situation for succession planning purposes. However,

such a job may present a bottleneck to decision making. A two-step difference means

that progression from the subordinate position to the manager’s role is possible, but

may be a stretch. Progression preparation greatly dissipates if the difference between

roles is three steps or more.

Figure 6: Job Shape and Size Illuminates Development

© 2005 Hay Group, Inc.

1 STEP

"The obvious Successor"

1

2

3

4

Hay Step

Boss

Subordinate

Boss

Subordinate

Boss

Subordinate

2 STEPS

3 STEPS"A possible Successor"

"An unlikely Successor"

P A P E RW O R K I N G

1133

“Traditional” line structures typically incorporate two-step differences between manager

and subordinate, with opportunities for internal succession. In leaner structures,

vertical progression is less possible, and career development and succession planning

should look to lateral moves and moves “outside the chimney” to secure future

leadership development.

P a y S t r u c t u r e s a n d G r a d i n g

Job evaluation is often used for—and is primarily associated with—assessing internal

relativities and developing compensation administration arrangements that reflect

the value-added contribution of specific roles. The relationship between job size and

pay can easily be demonstrated in Figure 7. For salary administration purposes, this

provides the basis for grouping jobs into grades and/or bands.

Debate continues over the relative merits of traditional grades and broad bands. In

the former, all positions are administered around a common midpoint or target

salary. On the other hand, broad-banded structures may provide greater flexibility

and often focus management’s pay decisions more on individual capability than job

size. Market anchors are often used for jobs within a band as a point of reference,

while midpoints are used in graded structures to reflect internal equity as well as

external competitiveness.

Note that broadbanding is likely to be more appropriate where a hierarchical

organization structure is either flat or deemphasized in favor of a team- or project-

based approach.

Analysis of s tep d i f ferences

between jobs wi th in a h ierarchy

can a lso be used to assess the

extent to which a job prepares

one for the addi t ional

chal lenges of a b igger job.

Figure 7: Job Size Relative to Pay

Job Content

$

Bands

Job Content

$C

A

B

© 2005 Hay Group, Inc.

D

P A P E RW O R K I N G

1144

Using the Hay Guide Chart-Profile Method brings further advantages in this

respect, since it provides direct access to comparable market data. We design quality

assurance processes to guarantee our methodology’s consistent application, which

also enables us to develop and maintain a compensation survey database that

provides market comparisons by measured job size in addition to traditional job-

model matching. Such comparisons prove far more accurate than comparisons

based on job/title matching, even when controlling industry and organization size.

T h e J o b E v a l u a t i o n P r o c e s s

A s mentioned, our research shows that only 18% of organizations have

proactive audit processes on maintaining job evaluation appropriateness.

The balance of the organizations face inherent risks in using a reactive job evaluation

review process—that is, responding to job evaluation change requests as they are made

by line management. Over time, job levels across the organization tend to creep up if

there is not a proactive audit process.

Job levels typically are easier to move up than down. In only responding to the

so-called “squeaky wheels,” an organization runs the risk of job level inflation over

time, as well as inconsistencies between business groups based on who more actively

uses the job evaluation process. Rolling proactive reviews should be performed at a

functional or business-unit level every few years. These can go a long way in improving

a job evaluation program’s credibility and consistency, especially if it is performed in

conjunction with a design and effectiveness review within the organization.

In addition,our experience demonstrates that effective job evaluation processes also

validate added accountabilities to jobs by defining the incremental business value of

these new accountabilities and their degree of alignment to organization objectives. If

you transfer accountabilities from other jobs, then these processes typically determine

the impact of a loss of these accountabilities from those jobs.

The Hay Method provides

market compar isons on the

basis of measured job s ize .

Such compar isons have proven

to be far more accurate than

compar isons based on

job/ t i t le matching.

P A P E RW O R K I N G

1155

C o n c l u s i o n

J ob evaluation is alive and well. Leading organizations use job evaluation as a

source of competitive advantage by improving the organization’s ability to

manage its investment in human resources with greater credibility,discipline,and fairness.

Job evaluation is not only about maintaining internal equity in the compensation

program. It can facilitate organizational clarity, building capability, and establishing

commitment through culture and rewards. It is a critical management tool, extremely

useful in ensuring an organization’s proper integration of strategy, culture, structure,

process, people, and reward.

A b o u t H a y G r o u p

H ay Group is a global organizational and human resources consulting firm

that helps its clients—Boards, CEOs, Executives, and HR Managers—on

virtually all aspects of their people-related business issues. Founded in 1943, Hay

Group has over 2,200 employees working from 77 offices in 42 countries. Our

areas of expertise include:

� Design and analysis of organizations and jobs;

� Talent management through assessment, selection, and development of executives, managers, and teams;

� Compensation, benefits, and performance management;

� Executive remuneration and corporate governance; and

� Employee and customer attitude research.

Hay Group works with nearly three-quarters of FORTUNE’s top-50 Most Admired

Companies, as well as many mid-sized and non-profit corporations, public

institutions, and governments.

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